Correlation Between Meridian Equity and Meridian Growth

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Can any of the company-specific risk be diversified away by investing in both Meridian Equity and Meridian Growth at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Meridian Equity and Meridian Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meridian Equity Income and Meridian Growth Fund, you can compare the effects of market volatilities on Meridian Equity and Meridian Growth and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Meridian Equity with a short position of Meridian Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meridian Equity and Meridian Growth.

Diversification Opportunities for Meridian Equity and Meridian Growth

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Meridian and Meridian is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Meridian Equity Income and Meridian Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Growth and Meridian Equity is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Meridian Equity Income are associated (or correlated) with Meridian Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Growth has no effect on the direction of Meridian Equity i.e., Meridian Equity and Meridian Growth go up and down completely randomly.

Pair Corralation between Meridian Equity and Meridian Growth

Assuming the 90 days horizon Meridian Equity Income is expected to generate 0.59 times more return on investment than Meridian Growth. However, Meridian Equity Income is 1.69 times less risky than Meridian Growth. It trades about 0.1 of its potential returns per unit of risk. Meridian Growth Fund is currently generating about 0.04 per unit of risk. If you would invest  1,225  in Meridian Equity Income on August 26, 2024 and sell it today you would earn a total of  258.00  from holding Meridian Equity Income or generate 21.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Meridian Equity Income  vs.  Meridian Growth Fund

 Performance 
       Timeline  
Meridian Equity Income 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Meridian Equity Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Meridian Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Meridian Growth 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Meridian Growth Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Meridian Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Meridian Equity and Meridian Growth Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Meridian Equity and Meridian Growth

The main advantage of trading using opposite Meridian Equity and Meridian Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meridian Equity position performs unexpectedly, Meridian Growth can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Meridian Growth will offset losses from the drop in Meridian Growth's long position.
The idea behind Meridian Equity Income and Meridian Growth Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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